Advanced District Concepts: More Fun With the Worksheet! 2014 Student Activity Conference

ACCOUNTING Advanced District Concepts: More Fun With the Worksheet! 2014 Student Activity Conference

UIL Accounting 2014 SAC Advanced District Concepts: Worksheet -2- Suggested Solving Strategy and Detailed Solutions for 2014 D1, Groups 8, 9, 10, 11, and 12 Just as a jigsaw puzzle has any number of starting points and subsequent sequences for solving, so does this worksheet problem. The steps in this instruction attempt to follow the given information in Table 3 of the test using the advice Write Down What You Know so you read each item only once. Set up T-accounts only when one is needed. Use the worksheet instead of a T-account whenever possible. Remember, on the modified worksheet (explained below), the contents in a row from left to right has the same flow as a T-account has from top to bottom. Practice modifying the worksheet form to write down what you know about: Beginning of the Fiscal Period Balance use the margin space to the left of the Account Title Activity During the Fiscal Period use the available leftover space in the Account Title column Abbreviations used in this instruction: TB = trial balance ADJ = Adjustment ATB = Adjusted Trial Balance A. Read the first six paragraphs of Table 3. B. Bank Reconciliation Belongs in TB Debit Column General Ledger Bank Balance Before Reconciliation Balance Per Bank Statement 7,438 Less Bank Service Charge <25> Less O/S Checks <1,586> Plus Deposits in Transit 2,784 Reconciled Balance Reconciled Balance 1. Write down what you know from the given information (see above). 2. Calculate the reconciled balance (on the Bank side above). 7,438 1,586 + 2,784 = Reconciled Balance of $8,636 3. Write the Reconciled Balance on both the Bank side AND the General Ledger side. Belongs in ATB Debit Column 4. Work backwards on the General Ledger side and calculate the balance in the Cash in Bank account as it would have appeared in the General Ledger PRIOR to the bank reconciliation. Reconciled Balance 8,636 PLUS service charge 25 equals $8,661. 5. Write the Cash in Bank amounts on the worksheet as follows: A. TB Debit 8,661 B. ATB Debit 8,636 6. Plot the ADJ (debit Miscellaneous Expense & credit Cash in Bank) on the worksheet. 7. Calculate the ending balance of Miscellaneous Expense: 130 + 25 = 155 and write 155 on the worksheet in the ATB debit column.

UIL Accounting 2014 SAC Advanced District Concepts: Worksheet -3- C. Accounts Receivable Accts Receivable 1-1-13 10,640 33,793 customers paid on account 1. Build a T-account and write in the 1-1-13 balance of $10,640 (see above) 2. Consider the transaction for received on account: DR CR Cash in Bank 33,793 Accounts Receivable 33,793 3. Do not post to Cash again. The reconciled bank balance just calculated $8,636 already reflects the collections on account from customers. We only analyzed this transaction in order to dissect what had happened to Accounts Receivable from the beginning of the year, during the year, and to the end of the year. So there are four parts to the Accounts Receivable puzzle. We know the beginning balance and collections. We still do NOT know charges on account or the ending balance. 4. This is all we can do with the Accounts Receivable information at this time. Save this T-account for later. There is nothing to write on the worksheet for Accounts Receivable at this time. D. Merchandise Inventory: 1. Write the 1-1-13 balance of $12,690 in the TB Debit column. 2. Always look at Income Summary for clues about the ADJ for ending Merchandise Inventory. How did $1,570 end up in the ATB Credit column? There must have been an ADJ: DR CR Merchandise Inventory 1,570 Income Summary 1,570 3. Write the above entry on the worksheet in the ADJ columns 4. Calculate the ending Merchandise Inventory balance: 12,690 + 1,570 = 14,260 and write this on the worksheet in the ATB debit column. E. Supplies: 1. Write the beginning balance $3,740 on the worksheet in the left margin for Supplies. 2. Write $11,770 (purchased during the year) in the available space in the Account Title column for Supplies. 3. Calculate the TB debit balance 3,740 + 11,770 = 15,510 and write it in the TB debit column for Supplies. 4. Write the ending inventory $4,125 in the ATB debit column. 5. Visualize the following T-accounts and compare to the placement on the worksheet: 1-1-13 3,740 purchased during 11,770 TB 15,510 ATB 4,125 Supplies ADJ Supplies Expense

UIL Accounting 2014 SAC Advanced District Concepts: Worksheet -4-6. Calculate the ADJ: 15,510 4,125 = expense 11,385 7. Write the ADJ on the worksheet (you will have to add the account title Supplies Expense. (debit Supplies Expense and credit Supplies $11,385) 8. Also write the balance of Supplies Expense ($11,385) in the ATB debit column Strategy Tip: Practice viewing a (horizontal) row on the modified worksheet as you would the (vertical) T-account. Eventually you won t need to draw T-accounts to solve a worksheet problem; you will see the T-account on the modified worksheet row. F. Prepaid Insurance: 1. Write the beginning balance $1,575 on the worksheet in the left margin for Prepaid Insurance. 2. Write $5,016 (purchased during the year) in the Account Title available space for Prepaid Insurance. 3. Calculate the TB debit balance 1,575 + 5,016 = 6,591 and write it in the TB debit column for Prepaid Insurance. 4. Write $2,090 (unexpired) in the ATB debit column for Prepaid Insurance. 5. Visualize the given information in T-account form: 1-1-13 1,575 purchased during 5,016 TB 6,591 ATB 2,090 Prepaid Insurance ADJ Insurance Expense 6. Calculate the ADJ: 6,591 2,090 = expense 4,501 7. Write the ADJ on the worksheet (you will have to add the account title Insurance Expense. (debit Insurance Expense and credit Prepaid Insurance $4,501) 8. Also write the balance of Insurance Expense ($4,501) in the ATB debit column. G. Accounts Payable: Accts Payable 42,690 1-1-13 paid to vendors on account 124,573 1. Build a T-account and write in the 1-1-13 balance of $42,690 (see above) 2. Consider the transaction for paid on account: DR CR Accounts Payable 124,573 Cash in Bank 124,573 3. Do not post to Cash again. The reconciled bank balance calculated previously $8,636 already reflects the amounts paid to vendors on account. We only analyzed this transaction in order to dissect what had happened to Accounts Payable from the beginning of the year, during the year, and to the end of the year. So there are four parts to the Accounts Payable puzzle. We know the beginning balance and payments on account. We still do NOT know charges on account or the ending balance. 4. This is all we can do with the Accounts Payable information at this time. Save this T-account for later. There is nothing to write on the worksheet for Accounts Payable at this time.

UIL Accounting 2014 SAC Advanced District Concepts: Worksheet -5- H. Owner s Capital: 1. Write the beginning balance $20,810 on the worksheet in the left margin for Brent Fine, Capital. 2. Write $5,000 (owner contributed DURING the year) in the Account Title available space for Brent Fine, Capital. 3. Calculate the TB credit balance: 20,810 + 5,000 = 25,810 and write it on the worksheet in the TB credit column. 4. This balance ($25,810) should also be written in the ATB credit column. I. Owner s Drawing: 1. Calculate the amount withdrawn by the owner: 1,200 x 12 months = 14,400 and write it on the line for Brent Fine, Drawing in the TB debit column AND the ATB debit column. J. Given Cash Sales There is nothing we can do with this information at this point. But you should see a clue. If we knew Total Gross Sales, we could deduct the cash sales given to arrive at sales on account. If we knew sales on account, it would help solve for Accounts Receivable. K. Given Gross Profit Percentage Once again, we are gathering information, and the idea should be coming to you to use the income statement formula to solve for several missing pieces. L. Given Purchases: 1. Locate the T-account you prepared for Accounts Payable and make a T-account for Purchases. Recall that this company purchases on account ONLY merchandise for resale. When Accounts Payable is credited, the ONLY thing debited is Purchases. Accts Payable 42,690 1-1-13 paid on account 124,573 cash purchases 21,618 108,313 charged on account 108,313 26,430 129,931 Purchases 2. The given information for Purchases is shown above. 3. The purchases made on account is shown above as a debit to Purchases and a credit to Accounts Payable. 4. The 12-31-13 balance of Accounts Payable shown above was calculated as follows: 42,690 + 108,313 124,573 = 26,430 and write this balance on the worksheet for Accounts Payable in the TB credit column AND in the ATB credit column. 5. Total Purchases is calculated: 21,618 + 108,313 = 129,931 and write this balance on the worksheet for Purchases in the TB debit column AND the ATB debit column.

UIL Accounting 2014 SAC Advanced District Concepts: Worksheet -6- M. Income Statement Formula Write Down What You Know. Practice using abbreviations to save time. Use the same column format each time. Below is the income statement formula indicating what we know so far and also the missing pieces. Some of the missing pieces can now be calculated; and for other missing pieces, more information is needed. S SD <1,451> SRA <3,279> Net S 100% BI 12,690 P 129,931 TI 3,812 Del PD <4,260> PRA <3,718> NP COMAS EI <14,260> COMS GP 41% Exp < > NI 1. As you solve for the following, fill in the amounts in the formula blanks. 2. Calculate Cost of Delivered Merchandise (Del): 129,931 + 3,812 = Del 133,743 3. Calculate Net Purchases (NP): Del 133,743 PD 4,260 PRA 3,718 = NP 125,765 4. Calculate Cost of Merchandise Available for Sale (COMAS): BI 12,690 + NP 125,765 = COMAS 138,455 5. Calculate Cost of Merchandise Sold (COMS): COMAS 138,455 EI 14,260 = COMS 124,195 6. Given GP% is 41% and that gross profit is based on NET sales (NOT gross sales). Therefore, net sales is equal to 100%. Calculate the COMS%: Net Sales 100% minus GP% of 41% equals COMS% of 59%. 7. Use COMS amount and COMS% to calculate NET sales: COMS $124,195 / 59% = NET sales $210,500 ($124,195 /.59 = 210,500) 8. Calculate gross profit amount: Net sales 210,500 COMS 124,195 = GP 86,305 9. Calculate GROSS sales: Net sales 210,500 + SD 1,451 + SRA 3,279 = GROSS sales 215,230. 10. Write GROSS sales 215,230 on the worksheet on the row for Sales in the TB credit column AND in the ATB credit column.

UIL Accounting 2014 SAC Advanced District Concepts: Worksheet -7- This is what the incomes statement formula looks like now: S 215,230 SD <1,451> SRA <3,279> Net S 210,500 100% BI 12,690 P 129,931 TI 3,812 Del 133,743 PD <4,260> PRA <3,718> NP 125,765 COMAS 138,455 EI <14,260> COMS 124,195 59% GP 86,305 41% Exp < > NI N. Return to Accounts Receivable: 1. Locate the T-account you prepared for Accounts Receivable. Build a T-account for Sales and fill in what you know. (Take care that you differentiate between gross sales and net sales. When it comes to sales think about what is found in the General Ledger.) Sales 182,423 cash sales (given) customer charges 215,230 gross sales Accounts Receivable 1-1-13 10,640 33,793 collected on account 2. Calculate the amount of sales made on account by customers: Gross sales 215,230 less cash sales (given) 182,423 = sales on account 32,807 and fill this in on the above T-accounts. Also calculate the ending balance for Accounts Receivable: 10,640 + 32,807 33,793 = 9,654 See below for end result: Sales Accounts Receivable 1-1-13 10,640 182,423 cash sales (given) 32,807 customer charges 32,807 215,230 gross sales 9,654 33,793 collected on account 3. Write the Accounts Receivable balance $9,654 on the worksheet for Accounts Receivable in the TB debit column AND the ATB debit column.

UIL Accounting 2014 SAC Advanced District Concepts: Worksheet -8- O. Remaining Given Balances in the TB Columns of the Worksheet extend these to the ATB columns. These are Equipment & Store Shelving, SD, SRA, TI, PD, PRA, and all the expense accounts. This will show that the following balances are still unknown: Sales Tax Payable, Salaries Expense, and Payroll Tax Expense. P. The paragraph in the Table about contracting with a CPA is given to clarify a number of things: The CPA is not an employee who gets a Form W-2; rather the CPA is an independent contractor. Therefore, fees paid to the CPA are NOT a part of Salaries Expense. The CPA began providing a service in 2014 which explains why the 2013 worksheet does not have an expense account called Professional Services Fees Expense or the like. Q. Calculate Salaries Expense: Social Security tax withheld (given) 992 / SS Rate.062 = Salaries Expense $16,000, and write this amount on the worksheet for Salaries Expense in the TB debit column AND in the ATB debit column. R. The given information All employer payroll tax expense was paid prior to 12-31-13 confirms that there are no payroll related LIABILITY accounts. 1. Use the given information in the 2014 D1 Group 5 to calculate Payroll Tax Expense: SS 16,000 x.062 = 992 Med 16,000 x.0145 = 232 * SUTA 9,000 x.027 = 243 * FUTA 7,000 x.008 = 56 Payroll Tax Expense 1,523 * Recall that SUTA & FUTA have maximums! The employer only pays SUTA on the first $9,000 that each employee earns for the year. The employer only pays FUTA on the first $7,000 that each employee earns for the year. 2. Write $1,523 on the worksheet for Payroll Tax Expense in the TB debit column AND in the ATB debit column. S. Sales Tax Payable since no sales tax rates were given and no information provided about which sales were sales taxable and which sales were not, the only thing left to do to solve is to plug the difference. 1. Add the debits in the ATB: 8,636 + 9,654 + 14,260 + 4,125 + 2,090 + 25,410 + 14,400 + 1,451 + 3,279 + 129,931 + 3,812 + 18,000 + 7,436 + 2,580 + 16,000 + 1,523 + 155 + 11,385 + 4,501 = 278,628 2. Subtract the known credits in the ATB: 278,628 (debits) 26,430 25,810 1,570 215,230 4,260 3,718 = 1,610 3. Write $1,610 on the worksheet for Sales Tax Payable in the TB credit column AND in the ATB credit column.

UIL Accounting 2014 SAC Advanced District Concepts: Worksheet -9- T. At this point all of the answers to Group 8 and Group 9 have been calculated. From Group 10, we have solved Q s# 64, 65, 66, 67, 69, and 70. Here are the final solving steps: 1. Q#73 Total Expenses: (from the ATB debit columns beginning with Rent Expense): 18,000 + 7,436 + 2,580 + 16,000 + 1,523 + 155 + 11,385 + 4,501 = 61,580 2. Q#68 Net Income: GP 86,305 Total Expenses 61,580 = Net Income 24,725 3. Q#71 Total Assets (from the ATB debit column Cash in Bank through Equipment & Store Shelving): 8,636 + 9,654 + 14,260 + 4,125 + 2,090 + 25,410 = 64,175 4. Q#72 Total Liabilities (from the ATB credit column): Accounts Payable 26,430 + Sales Tax Payable 1,610 = 28,040 5. Group 11 Q#74 Total charge sales (calculated earlier) $32,807 6. Group 11 Q#75: (what is the balance of the Capital account AFTER all closing entries have been posted) Brent Fine, Capital 20,810 1-1-13 5,000 owner s capital contribution during 2013 25,810 TB 24,725 net income for 2013 Drawing 14,400 36,135 12-31-13 after all closing entries 7. Peace of Mind Double Check: Assets = Liabilities + Owner s Equity 64,175 28,040 36,135 On the next page is a portion of the completed worksheet showing all that we have calculated thus far. Group 12: Practice calculating the subtotals on the worksheet for the Income Statement Debit and Credit columns and the Balance Sheet Debit and Credit columns WITHOUT actually extending each account balance. This tip is a HUGE time saver. See the last worksheet form in this instruction for color-coded guidance and a tip regarding the placement of the Net Income (or Net Loss) amount on the worksheet form.

UIL Accounting 2014 SAC Advanced District Concepts: Worksheet -10- Beg. Fine s Auto Parts Bal. Worksheet Jan. 1 For the Year Ended December 31, 2013 Account Title Trial Balance Adjustments Adjusted Trial Balance Debit Credit Debit Credit Debit Credit Cash in Bank 8,661 25 8,636 Accounts Receivable 9,654 9,654 Merchandise Inventory 12,690 1,570 14,260 3,740 Supplies 11,770 15,510 11,385 4,125 1,575 Prepaid Insurance 5,016 6,591 4,501 2,090 Equipment & Store Shelving 25,410 25,410 Accounts Payable 26,430 26,430 Sales Tax Payable 1,610 1,610 20,810 Brent Fine, Capital 5,000 25,810 25,810 Brent Fine, Drawing 14,400 14,400 Income Summary 1,570 1,570 Sales 215,230 215,230 Sales Discounts 1,451 1,451 Sales Returns & Allowances 3,279 3,279 Purchases 129,931 129,931 Transportation In 3,812 3,812 Purchases Discounts 4,260 4,260 Purchases Returns & Allow. 3,718 3,718 Rent Expense 18,000 18,000 Utilities Expense 7,436 7,436 Advertising Expense 2,580 2,580 Salaries Expenses 16,000 16,000 Payroll Tax Expense 1,523 1,523 Miscellaneous Expense 130 25 155 Supplies Expense 11,385 11,385 Insurance Expense 4,501 4,501 277,058 277,058 17,481 17,481 278,628 278,628

UIL Accounting 2014 SAC Advanced District Concepts: Worksheet -11- Fine s Auto Parts Worksheet For the Year Ended December 31, 2013 Account Title Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Cash in Bank 8,636 Accounts Receivable Tip for Worksheet Net Income/Loss: 9,654 Merchandise Inventory 14,260 Supplies Net Income increases Capital. We 4,125 Prepaid Insurance increase Capital with a credit. So net 2,090 Equip. & Store Shelving income is ALWAYS written in the 25,410 Accounts Payable 26,430 Balance Sheet CREDIT column, under Sales Tax Payable 1,610 the first subtotal line. Brent Fine, Capital 25,810 Brent Fine, Drawing 14,400 If you write net income in the credit Income Summary 1,570 column of the Balance Sheet, you will Sales 215,230 Sales Discounts DEBIT the Income Statement column. 1,451 Sales Ret. & Allow. 3,279 Purchases A net loss decreases Capital. We 129,931 Transportation In decrease Capital with a debit. So net 3,812 Purchases Discounts loss is written in the Debit column of 4,260 Purchases Ret. & Allow. Balance Sheet; therefore, it will also 3,718 Rent Expense be written in the Credit column of the 18,000 Utilities Expense Income Statement. 7,436 Advertising Expense 2,580 Salaries Expenses 16,000 Then AUTOMAGICALLY all of the Payroll Tax Expense 1,523 final totals of the last four columns of Miscellaneous Expense 155 Supplies Expense the worksheet will come out correctly 11,385 Insurance Expense in balance respectively. 4,501 278,628 278,628 200,053 224,778 78,575 53,850 Net Income 24,725 24,725 224,778 224,778 78,575 78,575